Dana Corp. creditors said the company's latest plan to reward six top executives would allow them to reap a "windfall" if they were to get Dana to cut workers' retirement benefits.
The assertion, made in court papers filed Monday, indicated Dana has made little progress in winning creditors' support for its plan to motivate top executives to stick with the company during bankruptcy proceedings. Dana modified the incentive plan this month amid fierce criticism from creditors.
But the modifications serve only to enrich the executives at the expense of creditors and workers, Dana's committee of unsecured creditors said in papers filed with the U.S. Bankruptcy Court in Manhattan.
It said the new plan doubles, to $18 million, the potential payoff Dana's chief executive, Michael Burns, could get for staying with the company. It also said the plan now actually creates an incentive for executives to get Dana to cut workers' benefits and reject various company contracts.
"In that situation, the debtors' proposed bonus scheme would enrich the executives at the cost of every constituency in the case, including retirees who would suffer from the loss of their benefits, as well as creditors and shareholders," the committee said.
A spokesman for Dana, Chuck Hartlage, declined to comment on the creditors' assertions. But he said Dana's board believes the terms of the bonus plan are "fair and reasonable and are consistent with both industry and Chapter 11 standards."
Dana, of Toledo, Ohio, is among the largest of the U.S. automobile-parts companies that have tumbled into bankruptcy proceedings recently amid production cutbacks by big auto manufacturers. The company had nearly $7 billion in debt when it began its Chapter 11 reorganization in March.
The company, which has about 40,000 workers, hasn't yet made a decision on whether to cut retirement benefits. Dana indicated that cuts are a possibility when it asked a judge to appoint a committee to represent retirees.
"Addressing retiree benefits and other legacy costs is likely to be a critical component of the overall restructuring plan," Dana said in court papers. It said it spent $130 million on retirement benefits last year and currently has retiree obligations totaling $1.5 billion.
Dana has said it needs to reward Burns and other executives to ensure stability in its leadership ranks. It has said in court documents that unless the executive-compensation plan is approved, Burns could see his compensation decrease 49 percent from 2005. It said Dana executives also have lost many of their post-retirement benefits.
U.S. Bankruptcy Judge Burton Lifland, who is overseeing Dana's bankruptcy reorganization, is scheduled to consider the latest executive-compensation plan at a hearing in Manhattan on Sept. 5.
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